Dubai's recovering property industry may be one of the beneficiaries of the upcoming opening of a new international airport, which officials hope will one day be the busiest airport in the world.
The new airport "will definitely have a major impact on the Dubai real estate market over the next 10 years," Craig Plumb, head of research for Jones Lang LaSalle in the Middle East, told WPC News. "It's not just the airport itself, but all the additional infrastructure that will go with it."
The Al Maktoum International, which is part of the Dubai World Central complex, will open to passenger traffic on Oct. 27, after receiving formal certification from the General Civil Aviation Authority last month. The first phase is projected to handle a modest 7 million passengers - the first carriers to use the airport reportedly will be the Saudi-based carrier Nasair and the Hungarian budget airline Wizzair - but the airport eventually will be large enough to handle 160 million passengers and 12 million tons of cargo a year.
More traffic means more vacationers, more second home buyers and more investors.
"The new airport and increasing air traffic arising from it will be a meaningful contributor to the sustainability of the housing market in this part of the city," said Jonathan Fothergill, head of valuations for Cluttons UAE, the consultancy.
The property industry is hoping Dubai will win the rights to Expo 2020, which, coupled with the airport, could provide a substantial boost to the market. Dubai property prices are up 30 percent in the last year, but there are concerns that the growth is setting up another boom-bust cycle.
"Increasing traffic into the new airport, combined with the impact of a successful Expo 2020 event will surely create several hundred thousand jobs which will result in further demands in the medium to long terms on the emirate's housing supply," Mr. Fothergill told WPC News.
The bid for the Expo includes a promise to fast track construction of a metro extension to the new airport. It would also accelerate construction of the next phase of the airport.
But if Dubai doesn't win the Expo, plans call for a gradual ramp up of Al Maktoum, with significant traffic not expected until after 2020 and the final phases not opening to 2030, at the earliest.
"If they win [the Expo], the timing of the new airport will be brought forwards, if not this is likely to remain a longer term project," Mr. Plumb said.
Dubai is spending $7.8 billion to renovate the existing airport, Dubai International, a long term process which will increase the capacity to handle 100,000 passengers a year by 2020.
Despite the upgrade, there is speculation that Dubai International will eventually be shut down.
"What we're trying to work out right away is whether there'll be an impact on capacity at Dubai International if we continue to operate two airfields," Dubai Airports chief executive Paul Griffiths recently told Bloomberg. "We might end up with a situation where two give you less capacity than if you concentrate all your operations on a single airport. If that turns out to be the case, clearly we won't be operating two."
That would allow the government to find "alternative purposes" for the real estate, he said.
In the short term, Al Maktoum will grow as a cargo airport, part of an ambitious effort to develop Dubai as a logistics and cargo hub for the region. Dubai World Central is part of connected 200-kilometer free zone, including Jebel Ali Port and the the Jebel Ali Free Zone.
The airport has been open for cargo operations since 2010.
"To date the airport has therefore only been a benefit to industrial and warehouse users," Mr. Plumb said. "The benefits to other sectors will really only be felt once the passenger numbers are significant -- which is unlikely to be before 2020."